I recently spoke at the Wave Influence 2.0 summit in London about advocacy and authority (Brian Solis was keynote speaker and he gave an excellent presentation on Influence 2.0 – short overview from him here).
Digital Transformation and the need to develop more agile ways of working provides the perfect vehicle on which to drive employee advocacy …and employer branding.
When I speak to leadership teams or consult on agile transformation with corporates I’m always keen to stress that there is never one all-purpose solution to what a successful digital transformation looks like. We set out a broad over-arching roadmap to transformation in our book, but also emphasise that each organisation needs to find its own path and make smart decisions about the selective application of agile structures, processes and working. Agile is not one-size-fits all, and it is just as important to think about being agile as it is about doing agile.
Yet the need for far greater organisational responsiveness and continuous and systematic (not episodic) innovation means that we do need a more fundamental rethink of the appropriateness of corporate structures that are typically dominated by functional silos and hierarchy. In order to truly take advantage of the opportunities afforded by digital technologies we need to think about resources, processes and priorities in a very different way.
In the structures work that I do I focus a lot on the potential for small, multidisciplinary teams to generate a disproportionate degree of change and value. I often use the Spotify ‘Squads, Tribes, Chapters’ model as one way of demonstrating a method for scaling agile resourcing. In reality, most companies start by deploying small, multidisciplinary teams in more focused, less scaled ways to innovate, generate new value and help support change (and there are other examples of this). But ING Bank in the Netherlands is an exception.
Over the past couple of years ING have reinvented their organisation at their group headquarters in the Netherlands (comprising 3,500 staff) from the ground up, moving from a traditional organisational model featuring functional departments such as marketing, IT, and Product Management, to a completely agile model that shares much in common with the Spotify example. They started with the group headquarters to show that you could begin with the core, and set an example to the rest of the business. You can get a good feel for how the transformation has been organised from this video (there’s also a good McKinsey interview with a couple of the key senior people, and a BCG one with the CEO):
Instead of organising around functional departments ING staff are organised into about 350 nine-person ‘squads’ and 13 ‘tribes’.
The Squads are small-multidisciplinary teams (no more than nine people) that are co-located and operate with a high degree of autonomy. Each squad is focused on a specific client-related objective for which it has end-to-end responsibility. A Product Owner is responsible for co-ordinating the activities of the squad and managing the backlog and priorities but they are a squad member rather than leader. As the mission evolves, the team and the functions that are represented evolve with it. As the mission is completed, the team is dissolved.
Squads that have interconnected missions are grouped together into Tribes, and these tend not to exceed 150 people (see Dunbar’s Number). A Tribe lead helps co-ordinate priorities, budgets and is the interface with other Tribes to ensure alignment and knowledge sharing. Each Tribe also has an Agile coach to support high performance.
Functional expertise and learning is supported through cross-squad Chapters, and a chapter lead effectively represents hierarchy for the Chapter, particularly in terms of performance management, staffing and personal development.
This approach has not only improved time-to-market, but increased productivity and employee engagement.
Apart from the level of commitment to agile working and resourcing (which I think is exceptional), there is a number of aspects of this (drawing from the McKinsey interview) that I think it’s important to note and which chime well with points that we bring out in the book :
When ING began the transformation there was no financial imperative to do so (they were doing well at the time), but they recognised that changing consumer behaviours and expectation could soon create significant challenges if they didn’t become more agile
ING recognised that it was not a linear transition, but about becoming a different type of organisation that is itself characterised by continuous change: ‘Transformation is not just moving an organization from A to B, because once you hit B, you need to move to C, and when you arrive at C, you probably have to start thinking about D.’
The re-organisation is focused on minimising obvious barriers to agility like bureaucracy and functional handovers but also on greater empowerment and autonomy to enable teams to move fast. I like the way that they describe a key objective as being to ‘build stronger, more rounded professionals out of all our people’.
The fact that each squad is focused end-to-end on a particular customer objective (and a common definition of success) and includes all the key functions needed to create value (marketing, product, commercial, UX, data analysts, IT engineers) means that this is a structure that is genuinely customer-centric
The new organisation is supported by a new agile performance-management model (because performance management really does need to change). Instead of manager’s salary and status being based on how much resource they control, it is now focused far more on how they deal with knowledge and deliver outputs
The re-organisation began with a compelling vision about what the business could be, and drew learnings from a pilot incorporating five or six squads. Implementation involved a revamp of the working environment (you can get a feel for that here)
Support functions such as HR, Finance, call centres, IT infrastructure and risk have not initially been included in the squads (and may never be) but have instead adopted agile working practices in different ways
ING have been focused as much on getting the culture right as they have the structure, spending a lot of time and energy focused on role modelling the right behaviours (customer-centricity, empowerment, ownership) to support change. One example of this is a complete revamp of the on-boarding programme which not only involves new employees moving around the business to generate informal networks and learning, but every employee spending a week in the call centre taking customer calls.
Meeting structure and governance – most meetings are informal, with formal ones kept to a minimum. Each squad has a clear written purpose for what they are working on, and an agreed way to measure the impact it has on customers, but has autonomy to prioritise and manage its daily activities. Mechanisms such as portfolio wall planning, Scrums and stand-ups ensure that the product owners within each Tribe keep the squads aligned. Quarterly Business Reviews (QBR) involves each Tribe notating what it achieved over the quarter, their biggest learning (from both successes and failures), its objectives for the next quarter and what they’ll need from other Tribes. These QBR documents are openly available to support transparency
The new structure has enabled ING to dramatically improve speed-to-market through more frequent releases, and increase the rate of innovation to help position them as the primary mobile bank in the Netherlands.
But it is the level of commitment to agile resourcing that is truly impressive, avoiding the common trap of adopting some agile attributes but not letting go of legacy structures, processes or governance. As Bart Schlatmann (who was the COO through the transformation) says:
‘It requires sacrifices and a willingness to give up fundamental parts of your current way of working—starting with the leaders. We gave up traditional hierarchy, formal meetings, overengineering, detailed planning, and excessive “input steering” in exchange for empowered teams, informal networks, and “output steering.” You need to look beyond your own industry and allow yourself to make mistakes and learn. The prize will be an organization ready to face any challenge.’
In our book on agile business we talk about the need to bring together a dual focus on both customer experience and employee experience to support digital transformation and change. We frame the latter by drawing on Dan Pink’s excellent work from his book Drive, in which he describes the limitations of extrinsic motivators (like money) in the workplace and instead distills three key intrinsic elements (supported by extensive and relevant research, studies and examples) that really motivate people at work:
Autonomy:- the ability to make a difference in the area that we are responsible for
Mastery:- learning, progress and getting better at our work over time
Purpose:- the feeling that what we’re doing is worthwhile
Intuitively that just makes a whole bunch of sense but what was striking for me when I first read that book was just how much these qualities characterise the cultures, practices and environment that I observe in the businesses that are making a success of introducing new ways of working that are more fit-for-purpose for a digital world.
Bruce Daisley interviews Dan in the latest episode of his excellent eatsleepworkrepeat podcast. Dan talks about the foundational principles expounded in the book but he also gives some great examples of organisations applying them, and discusses how his thinking has developed. In particular, he describes how we should think about purpose not only in terms of the grand, visionary purpose that a business might set out to establish a compelling direction (Purpose with a capital ‘P’) but also the importance of purpose (with a small ‘p’) in the sense of employees knowing and feeling that they are making a valuable daily contribution. He mentions how frequent, iterative feedback is essential in supporting this and how inadequate annual performance review processes are (I’ve written about this exact subject before now). It always surprises me just how poor and often demotivating many performance management processes can be in supporting change and momentum and how this can be a critical potential barrier to agility that really needs to be reinvented from the ground up. As Professor Paul Dolan talks about here, one of the key lessons from Behavioural Science research is that small things can create big change (and at very little cost)
Dan also talks a lot about autonomy (something that I spend a fair amount of focus on in consulting gigs), and how a key part of this is the space that leaders can create within teams to originate new value and nurture experimentation. In reality this is never easy given the pressure most people are under in teams to deliver against short-term priorities but there is a real role that leaders can play in setting the right expectations and wherever possible giving their people the cover and freedom they need to carve out time and space. It may not be 20% time, but just a bit of space can bring exceptional benefits.
Dan gives a lovely example of the value of doing this. Scientists Andrei Geim and Kostya Novoselov won the Nobel prize for Physics in 2010 for their creation of Graphene which has been described as the scientific find of the century. Graphene is the ‘wonder material’ comprised of a single layer of carbon atoms, and is the thinnest and strongest substance known to science (about 200 times stronger than the strongest Steel) that already has an almost limitless number of applications.
But the creation of Graphene didn’t come from a structured long-term research programme. It came from mucking about in the lab. Geim and Novoselov ran ‘Friday Night Experiments’, a small amount of free time on Friday afternoons when lab staff could work on scientific experiments not related to their day job. In one such session they were playing around with sticky Scotch tape, using it to peel off layers of graphite flakes until they were only a few atoms thick. They realised that they could actually use this method to get down to the thinnest possible layer, just one atom thick, and create a material with completely unique properties.
When they won their nobel prize, the Nobel committee noted the way in which the scientists used playfulness in the way that they work together. We need to create more space for playfulness in business. Without it, we might never come up with the breakthrough ideas and concepts that can not only enable creative leaps forwards, but can quite possibly save our business.
Greater organisational agility comes from empowered teams that perform well in solving the challenges that really matter to the business. But those teams don’t need to be big. In our book on agile business we delve into the key role that small, multidisciplinary teams can play in generating a disproportionate amount of change and value in a digital transformation programme and beyond.
There is a temptation in large businesses to throw resource at problems in the assumption that more brains and bodies means better solutions. Internal politics results in people being included in the process who don’t really need to be there and don’t contribute much value. Representatives of functions that may only be needed at key points get included in the project team from the beginning and have to attend every update meeting. The result is 20+ people sat in a room trying to move a project forwards. Everything slows down.
The reality is that more is not better for team effectiveness. Harvard professor (and specialist in team dynamics) Richard Hackman has shown that one of the key challenges with large teams is in the growing burden of communication. Put simply, as group size increases the number of unique links between people also increases, but exponentially.
This exponential increase means that coordination and communication costs are soon growing at the expense of productivity.
Hackman defined four key features that are critical to create an effective team in an organisation:
Common team tasks that work towards fulfilling a compelling vision
Clear boundaries in terms of who is in the team, information flow, and alignment with other resources, priorities, policies and teams.
Autonomy to work within these boundaries
It’s therefore critical that we understand the difference between a real team and a looser ‘co-acting’ group, and how a (surprisingly common) lack of clarity, direction and autonomy impairs the ability to move fast.
Jeff Bezos, focused on retaining agility as Amazon scales, has famously described how teams in the company should get no larger than the number of people it takes to feed with two large pizzas (6-8 people). An effective small-multidisciplinary team is comprised of the people and skills areas needed to achieve key outcomes and no more (in the book we outline an effective way of managing dependencies across multiple small teams to ensure that the core team is kept small). This is important since it avoids not only communication problems, but also team scaling fallacy (the tendency for people to over-estimate team capability and underestimate task completion time as team size grows), and relational loss (the feeling that it is difficult to get support in large teams).
The multi-disciplinary composition of the team is important not only in achieving outputs, but in encouraging diversity. As Richard Hackman points out, homogeneity of team membership can often be a real problem in project teams since we tend to pick like-minded people to work with. Yet performance and creativity improves with greater diversity (including cognitive diversity, and having a substantive range in views about how the work should be structured and executed): ‘It is task-related conflict, not interpersonal harmony, that spurs team excellence’.
Digital technologies have transformed the dynamics of team contribution. Small, empowered teams can originate transformational ideas and successfully apply their capability to build and execute those ideas well. It’s time we re-imagined how we resource value creation in business.